DUBAI, April 1 (Reuters) - Saudi Arabia’s securities regulator said on Sunday it had approved the listing of local currency government bonds on the Saudi Stock Exchange, part of efforts to spur secondary market trading of debt and strengthen state finances.

The Capital Market Authority said over 204.4 billion riyals ($54.5 billion) of riyal bonds would be available to trade, including floating- and fixed-rate bonds and Islamic instruments. The CMA did not say when trade would start, but it usually begins within weeks of the CMA approving an instrument.

Authorities hope exchange-based trading of government debt will help to expand ownership beyond banks to insurers, mutual funds and even individual investors, making it easier for the government to finance its budget deficit.

By creating transparent benchmark prices for debt, the trading could also encourage more Saudi companies to issue corporate bonds, reducing their reliance on bank lending, which is high by international standards.

In mid-2015, the government began offering local currency bonds in monthly auctions to help cover a huge budget deficit caused by low oil prices. It suspended those issues in late 2016 as banks struggled to absorb so much debt and Riyadh began to borrow overseas, but launched monthly sukuk issues in mid-2017. (Reporting by Andrew Torchia; Editing by Mark Potter)